Ericsson announced Tuesday an internal investigation uncovered evidence of “corruption-related misconduct” that occurred in the Swedish telecommunications company’s Iraq operations between 2011 and 2019.
The company said in a press release it first recognized the potential for compliance failures in Iraq in 2018, when “unusual expense claims” triggered a review about potential breaches of the company’s code of business ethics. Ericsson launched an internal investigation focusing on the conduct of employees, vendors, and suppliers in the region from 2011-19.
The investigation found “serious breaches of compliance rules and the code of business ethics,” the company said, including the following examples of corruption-related misconduct:
- Making a monetary donation without a clear beneficiary;
- Paying a supplier for work without a defined scope and documentation;
- Using suppliers to make cash payments;
- Funding inappropriate travel and expenses; and
- Improper use of sales agents and consultants.
During Ericsson’s time in Iraq, some areas of the country were controlled by terrorist groups. The company identified payments made to intermediaries and the use of alternate transport routes to avoid Iraqi customs. Some of the alternate routes were controlled by ISIS, the company acknowledged.
“Investigators could not determine the ultimate recipients of these payments. Payment schemes and cash transactions that potentially created the risk of money laundering were also identified,” Ericsson said.
Additionally, the investigation found violations of the company’s internal financial controls, conflicts of interest, noncompliance with tax laws, and obstruction.
The probe concluded in 2019, but Ericsson shared the results Tuesday after numerous inquiries from Swedish and international press, the company said. An earlier statement provided much less detail on the Iraq investigation.
As a result of the investigation, Ericsson fired several employees and disciplined others while also ending some third-party relationships. The company undertook remedial actions like “closing gaps in our internal processes in the region and incorporating lessons from the investigation into our ethics and compliance program.”
“Ericsson is continuing to work with external counsel to review the findings and remediation resulting from the 2019 investigation to identify any additional measures that the company should take,” the company said.
Ericsson’s business practices in Djibouti, China, Vietnam, Indonesia, Kuwait, and Saudi Arabia came under scrutiny during a Foreign Corrupt Practices Act (FCPA) investigation that resulted in the company agreeing to pay more than $1 billion in a settlement with U.S. authorities in 2019. The Department of Justice and Ericsson entered into a deferred prosecution agreement (DPA), and the DOJ appointed an independent monitor for three years. The company agreed to continue cooperating with any ongoing DOJ investigations.
In October, Ericsson disclosed the DOJ informed the company it breached its obligations under the DPA by failing to produce certain documents and factual information. “At this stage it is premature to predict the outcome of these developments,” Ericsson said at the time.